The US has suspended its aid to Serbia, saying Belgrade is not fully co-operating with the UN war crimes tribunal in The Hague.
The US wants Ratko Mladic handed to The Hague
The decision means Washington will not disburse the last $25m of a $100m assistance package set up three years ago to help Serbia reform its economy.
The package was tied to Belgrade's relations with the Hague tribunal.
The US has expressed concern at the new Serbian government's reluctance to hand over people accused of war crimes.
A State Department spokesman on Wednesday urged Serbia to extradite a number of suspects - particularly
former Bosnian Serb commander Ratko Mladic, who is believed to be hiding in Serbia.
If such action was taken, Adam Ereli said, Secretary of
State Colin Powell was prepared to review the decision.
The BBC's Nick Hawton in Belgrade says that although the suspension of US aid will have no immediate impact on the Serbian economy, the decision could have longer-term consequences.
The International Monetary Fund, the World Bank and private investors may be discouraged from extending any more loans, our correspondent adds.
In December Serbia elected a new parliament with nationalist sympathies.
Prime Minister Vojislav Kostunica has said extraditing war crimes suspects to The Hague is not one of his government's priorities.